Audi unveils A3 Sedan to lure customers in American market

Audi, the world's second-largest maker of luxury vehicles, unveiled two sedan versions of the compact A3 designed to woo American and Chinese buyers seeking a small car with more trunk space.

The models will help the Volkswagen premium brand reach its annual U.S. sales goal of 200,000 in the U.S. "far before" the original target of 2020, Scott Keogh, the automaker's U.S. chief, told reporters Tuesday night in New York.

The A3 sedan will hit European showrooms later this year, with a starting price around 25,000 euros ($32,000), and will be rolled out in the United States and China in 2014. The automaker will also build a sport version called the S3.

Audi, which aims to be the global No. 1 by the end of the decade, needs the sedans to challenge Bayerische Motoren Werke and Daimler's Mercedes-Benz in the U.S., where Audi sells half as many cars. Expanding the A3 beyond hatchbacks is key for the U.S. and China, the world's two biggest markets, because drivers in those countries buy more sedans.

"The A3 sedan is an important car for Audi to make progress in the U.S. and catch up with BMW and Mercedes in terms of sales volume," said Frank Schwope, a Hanover, Germany-based NordLB analyst. "It's important for Audi to offer a diversified product range to maintain its growth."

The Ingolstadt, Germany-based automaker is targeting sales growth in the U.S. this year of 7.7 percent to 150,000 vehicles.

The new sedans will be derivatives of the updated A3 hatchback, which Audi began rolling out last August. The model, first introduced in 1996, is now in its third generation and accounted for 12 percent of the brand's deliveries last year. The A3 sedans, shown only to journalists last night, will have their public debut at next month's Shanghai auto show.

BMW this year has a narrow 407-vehicle sales lead globally over Audi through February, with Mercedes lagging 37,229 vehicles behind BMW. Mercedes is also expanding its compact offerings with new versions of the A- and B-Class currently on the market and the CLA compact, four-door coupe coming out next month. All three are targeting record deliveries this year.

The push for small models targets growing demand from consumers in space-constrained cities. To meet tighter environmental regulations, the brands also need robust deliveries of fuel-efficient cars to offset the emissions of high-margin luxury sedans and sport-utility vehicles.

"The trend toward smaller cars isn't about cheaper cars," Finbarr O'Neill, president of JD Power & Associates, said yesterday at an auto forum in New York. "What people are looking for now are cars packed with more features and they're willing to pay more."

Audi is investing 11 billion euros through 2015 to increase production and widen its model lineup. Audi is expanding a plant in Hungary, adding a factory in China and building a new production facility in Mexico to meet the need for increased production capacity.

Audi plans to double its offering of SUVs by 2020, a person familiar with the matter said last month. The automaker is developing the Q2, Q4 and Q6 as sportier alternatives to its current range of three SUVs, the person said at the time.

Audi is expanding a plant in Hungary, adding a factory in China and building a new production facility in Mexico to meet the need for increased production capacity.